Benchmark coal prices in Asia rose to their highest levels in nearly two years after Indonesia’s government announced curbs on exports of commodities, including coal.
New commodity export rules will cause delays in outbound shipments of coal from Indonesia, Bloomberg noted in a report on the price news, and said the disruption comes amid increased demand for coal during the summer heatwave, which leads to higher electricity consumption for air conditioning.
Demand for coal has risen sharply since the start of the US-Israel war against Iran, as the hostilities disrupt the normal flow of oil and gas from the Persian Gulf.
Indonesia’s trade ministry earlier today published technical regulations on exports of coal and ferroalloys, aiming to centralize the management of those exports under a single government agency, Reuters reported.
After the closure of the Strait of Hormuz, Asian energy importers and the European Union bloc are looking for alternatives to gas supplies from the Middle East, which are currently stuck behind the Strait of Hormuz or are not produced at all in Qatar, which halted LNG production on March 2 and two weeks later Iran’s largest LNG strike, LA LNG, hit the world.
Despite transition efforts, coal has emerged as a clear alternative, particularly in the EU. While the bloc is still racing with Asia to secure as much LNG as it can during the gas storage season, coal is also regaining lost ground. Japan and South Korea, in particular, have increased their fuel consumption since the start of the war. In South Korea, the growth in coal was particularly pronounced, with coal-fired electricity supply up 40 percent in April, the biggest jump since August 2019.
In the wake of this demand, Indonesia’s new export controls that require producers to ensure an adequate supply of the commodity for the domestic market, along with other new rules, will likely lead to increased purchases from other coal producers and longer-term price increases.